Sunday, February 21, 2010

Pantai sale

5 years later. So now Pantai Holdings Bhd, the Malaysian healthcare group run by Singaporeans since 2005, plans to sell its Malaysian government concession businesses "as it seeks to focus on growing its hospital business". Or so according to the Business Times here.

I'm not going to venture too deep into Pantai this time. Back in 2005, the front-page reports run by The Malay Mail back then were a major reason for my eventual departure from the NSTP group. When I started Bru mid 2006, I was able to give this debacle the space it deserved (click herehereherehere for samples of my past postings on this subject). Wasn't enough to save it, though.

Still, I'm obliged now to ask some pertinent questions:

1. What?! They only realised after 5 years that the 2 government concessions were under foreign hands?

2. Isn't the sale of Fomema and Medivest (both profitable) is an ominous sign that the hospitals are not doing well?

3. What's not mentioned anywhere in the article is that although Parkway owns 40% of Pantai, this Singapore group has total management control and is paid a handsome fee to run Pantai. Why?

Most likely not doing well as Malaysians learn to proactively take care of themselves and.....we do have rich culture of alternative medicine so why do it only the conventional western way which is damn bloody expensive anyway? ie. Chemotheraphy

The machineries are all big "western corporates" who have been shown time and time again do not do "research" for altruistic reasons. Same as the H1N1 scare...

"Isn't the sale of Fomema and Medivest (both profitable) an ominous sign that the hospitals are not doing well?"

Not necessarily. All entities, including indiviuals cash in on investments when the price is right or when there are better investment opportunities elsewhere.

However, the Govt should not allow the sale of Fomema, which is a low risk high profit gaji buta monopoly. When Fomema was "privatised' to Dr.M's son, it was a plain giveaway of a monopoly which the Govt would have profited considerably from had it held on to it. There's no reason to allow Pantai from making a capital gain on it now. The Govt should just take it back at original cost!!

Pantai's sale to Parkway is a good example of the lack of transparency of the Badawi regime.Commercial sale aside, there was no due diligence done and no vetting by the appropriate authorities.Otherwise, how did a public-listed got sold to a foreign party when it had two govt concessions in its stable?After realising the mistake, the 4th Floor roped in Khazanah to buy back 60% from Parkway at a far higher price,using the rakyat's money.But Khazanah did not know how to run hospitals. So they used more of our money to pay Parkway to run it for them, at a hefty management fee.Khazanah of course claimed that it had bought back Pantai to please the politicians and give the impression that it was also running Pantai. What crap!

I remember at the hike of this debacle, the spinners for Pak Lah were trying very hard to deflect the issue by saying the disposal was done by Mokhzani take make Tun M really bad in their systematic media scheme to smear Tun M.

But the fact was it was one Chinese Dato Lim who sold it to that Sinporean company!!!! (Mokhzani sold off Pantai to Dati Lim long time ago in 2000 !!)

Why is this Dato Lim so special that allow him to sell the Government assets to Singaporean without the relevant authorities?

Parkway "curi-curi" bought the 2 Government concession in Pantai Holdings.

Then some smart citizen voice out.

Kena tahan from the fact appearing in blogshpere, the PM later admitted there was a problem during the Hari Raya 2006.

Beauty of it Khazanah comes in to bail-out the Singaporean!!

Some smart Govt official should do a simple return on investment on this bail-out move by Khazanah.

The cost paid by Khazanah to get back the so-callled "control" of Pantai versus the return from the returns from Pantai Hospitals opereation (exclude the income from Fomema and Pantai Medivest as these was "illegally bought").

I am certain the above calculated return of investment is a joke for even a novice financial analyst!!!!

As a Pantai employee for more than 10 years, I cannot see any benefit with having Parkway in the management.They only bring in a handful of staff. Otherwise the rest of staff are the same as before.Now,staff are continuously leaving (I plan to do so) and the hospital charges are climbing like hell (ask any patient).Pantai was running better when it was run by Malaysians.

Rocky, I wonder why it is always Singapore that leads.Khazanah buys this new University business in China paying 10 times more from Singapore group.Maybank bought a banking unit in Indonesia from Temasek Holdings. Looks like Singapore makes more money selling their outlets in foreign countries to our GLCs.Our GLCs have to carry the lost-making babies while justifying the purchase paying manifold.As long as we have, Telekom, TNB, EPF, PETRONAS- not to worry. Singapore would love to deal with our Ministry of Finance to close any deal.

Is it true that the valuation used for the disposal of Pantai to Parkway were based assumptions that these 2 concessions (Pantai Medivest & Fomema) will be extended another 15 years despite the fact that at the time of the deal, the concession have not even near the expiry of the initial 15 years period.

Who is so gung-ho to give this kind of blessing? Or is it that the entire brokers were having great party time!!!!!

The fishy and foul smell of this deal still can't get away despite pouring tonnes of Dettol in attempt to "clean" it.

Despite all the breaches by the Singapore's (proud of its so-called corporate governance) Parkway in the acquisition of Pantai (Fomema & Pantai Medivest), the then administration of the bolehland Government did nothing to take any form of reprimand or punishment against Parkway.

But the most perplexing is, WHY Khazanah help Parkway to solve the issue and paid HIGH PRICE for it?

Can those in Khazanah/EPU/MOF involved in the deal please elaborate to us, the Rakyat!!!

on May 30, 2008 at 3:48 pm AnonymousWhy are we selling and buying many things to and from Singapore government company, Temasek Holdings? WHY? Why?

A few years ago 10% of Telekom/TM shares to Temasek Holdings. That was the time when Dato Wahid was the CEO of TM. Now he is the CEO of Maybank what a coincidence.

Last year Pantai Hospital was sold to Parkway, a Singapore company. Later, the Sleepy Head government discovered that FOMEMA was part of Pantai Holding and to leave FOMEMA, controlling foreign workers agency, under the hand of Singapore company was a threat to national security. So we bought and paid a premium of about RM700 – RM800 million.

Now Maybank is fighting to buy Bank Internasional Indonesia from Temasek at 4.6 times its book value. What a big joke?

There are too many Singapore operatives in this country. Did I hear about 4th floor of certain building??

Wednesday, August 30, 2006Pantai, Khazanah, Bailouts?What's Wrong With The Picture?

As reported in The Edge: "Khazanah Nasional Bhd's move to take control of Pantai Holdings Bhd, which holds two government healthcare concessions, will not hurt investor perception of Malaysia, said Second Finance Minister Tan Sri Nor Mohd Yakcop. “This is not a bailout. This is a market-driven solution to a problem where there is a willing buyer, willing seller. Pantai is seen to be in an industry which is viewed as sensitive as it holds two concessionaires. It (Khazanah's taking control) has resolved the issue of this sensitive sector," he told reporters in Putrajaya on Aug 29.

On Aug 28, Khazanah said its wholly owned subsidiary Pantai Irama Ventures Sdn Bhd had bought a 6.6% stake in Pantai and entered into a deal with Parkway to acquire the Singaporean company’s 134.7 million Pantai shares at RM2.65 each. Parkway would in turn acquire a 49% stake in Pantai Irama, which will have a 35% stake in Pantai. Parkway will be the operating partner through a management contract. Meanwhile, Parkway said Pantai Irama would have four directors with two each coming from the Khazanah arm and Parkway. The two Khazanah appointees are its executive director (investment) Ganen Sarvananthan and its senior vice president (investment) Tunku Ali Redhaudin Tunku Muhriz. Parkway's appointees are its chairman Richard Seow and managing director Dr Lim Cheok Peng. Meanwhile, Pantai's share price rose 10 sen to close at the year’s new high of RM2.61 on Aug 29, with a total of 5.56 million shares done. Its warrants also ended 10 sen higher at RM1.48."

Issues To Consider:1) Not a bailout, yes and no, but the problem with Pantai and Parkway was created when Parkway bought Pantai. Parkway is a foreign entity. The company definitely needed to secure approvals from SC/Bursa and most importantly FIC. What was the FIC doing in approving such a deal without batting an eyelid?? If a company was given a government concession, which materially effected the value of that company, that company is an entity that has "national interest" written all over it. Hence to sell controlling interest in that company is inequitable.2) That very same issue was what derailed Shin Corp and Temasek's deal early this year - so much so that Thaksin was eventually removed because of the deal. Shin Corp was started based on government concessions, and then to resell the company to a foreign party pissed a whole lot of people. 3) A bailout is ... like TRI and MAS and the government. When the company is bleeding and the owner does not have a clue on how to turn it around. Pantai is not a bailout in that sense, but of a different kind. The Parkway people found themselves in the middle of a storm in a teacup, much like the way temasek found itself embroiled in a stewing pot luck of tom yam goong. The politcal backlash was too much to endure for Parkway, and if Parkway were to maintain its independence, it will have to give up the concessions or sell it cheaply. That would have reduced Pantai's value dramatically. Khazanah stepping in would have been a solution in keeping the value in Pantai and appeasing the backbenchers.4) This deal mirrors excatly why Malaysia corporate still has some ways to go. We plug holes instead of making sure there are no holes to start with. We do crisis management when better planning and execution would have eliminated much of the need for crisis management. We find second rate solutions to unecessary problems which would not have sprung up with everyone exibiting more professionalism. If FIC did its job, or was allowed to do its job, instead of being railroaded to let the deal pass, such a thing would never needed to happen in the first place. If the authorities in the proper approval stages were allowed to do their jobs, and not being instructed to clear the approval processes, maybe such a thing would not need to happen.5) Khazanah stepping in needed the a spin from the Second Finance Minister to tell everyone why Khazanah was required to step in. We make life difficult for ourselves. The fact that Khazanah was asked to step in need not happen in the first place, it probably wasn't something they wanted control of. Can you imagine if Khazanah was asked to "step in" once a year to clean up the mess made by other - then after a few years, Khazanah would be holding controlling stakes in companies it did not wanted, and not part of its masterplan. Things like these saps the power and management time from Khazanah to do really fruitful things or maintain its long term investing strategy, without having to deal with unecessray hiccups. Just one of these deals a year can kill the effectiveness of Khaznah. The problem is these type of deals are not that infrequent ... want to go into examples?!!

Please, more professionalism, and no more railroading of certain projects/approval processes because certain people asked for them. Let the people appointed in their respective governing bodies to do their job, instead now they can only shrug their shoulders in exasperation. I love my country, Merdeka ... we have come a long way, no need to do everything the long way ... man!

Rocky, don't point your gun at Parkway Holdings. Go backwards.Tongkah and Faber Group got these contracts from Kementerian Kesihatan to supply medical equipment ,disposable stuff and all other medical stuff to all the Hospital Daerah for a concession of 15 years. The project worth more than 2-3 billions soon after Mahathir's son took major stake in Tongkah. Was there a tender process ? Ask Chua Ju Meng. Now the jewel in the crown are the government contracts. You need to be in Health Care business to get it. So Mahathir's son acquired Pantai. Hence came the bonus Fomema.Meanwhile Anwar's cronies went for Radicare concession. You don't have to wait 15 years to see money. Sell the going concern with the existing contracts. Call for rights issue. Underwriters are queing up. Ask Mahathir's son why he is not working any more.Don't be quick to point your gun at Parkway !So much for Corporate Governance in Malaysia. Do we need FIC, Security Commission, BNM approvals ? Put the ladies there , you get the approvals.

Anti-KJ,TQ for the correction on Fomema. Pantai Acquired Fomema for what when they already had 15 year concession to supply medical goods to all government hospitals ?Why did Mokhzani sell the company after securing Billions in contracts and concession ? How much he made in-all ?Why are rich contracts given to some only to change hands within years ? No moratorium or binding conditions such as not to sell to foreigners ? Why blame foreigners why they buy a company with cock-sure profits ? Thailand at least punished the culprit who sold key industries to Singapore !Investors should not get profit without labour.

There were some legal hiccups in PHB acquiring FOMEMA associated with a lawsuit against ADSB by Koperasi Doctor Malaysia Bhd., FOMEMA's 25% other shareholder!!

The FOMEMA deal was long in the pipeline and MM was fully aware of the FOMEMA acquisition at the time of his resignation in 2001, and if anything, was instrumental in the Govt/Dr.M agreeing to "privatise" FOMEMA!!

Then the chefs start cooking the deal. Broker's report by JP Morgan (analyst Melvin Boey) start calling buy for Pantai shares based on the silly valuation assumption that the 2 concessions (Fomema & Medivest) will be EXTENDED by another 15 years.

Then Dato Lim crossed his shares at RM2.25 to Parkway on that kind of silly valuation. Suprisingly, the EDGE reported that Dr Lim Cheok Peng, the MD of Parkway (a Malaysian & close assoc of the IGB Grp),justifies the acquisition is not expensive. Buyer justify for "cheap" acquisition wakakakaka.

When the potato was too hot to handle, Khazanah, the Santa Claus de Bolehland came in to bail out Parkway buying its shares at RM2.65 !!!!! This is atrocious, paying a further premium to Parkway's already high price paid to Dato Lim and on that silly valuation of EXTENDED period of concession. You see the brokers made killing twice, 1st of the Parkway acquition of Dato Lim's holding and second, the Khazanah acquisition of Parkway's holding and off course Dato Lim really made a killing as well.

The issue here is not whether Mokhzani or Dr M, its why & how can this gullible act of Parkway & Khazanah paying the price based on this silly assumption of EXTENDED concession period. Where is the governance, the due diligence, the compliances.

Who give the blessing to bulldoze all this and what was the price to facilitate this unusual transaction? Why our authorities were silent on this?

Dont Play Puks:thanks for the detailed clarification.Agree with most who commented here that answers are needed from the Finance Minister 2 as to how such a deal to sell to foreigners was approved lock,stock and barrel.

The first commentator of this post said the right thing - give us the answers!